Manually Adjusting Payments To Avoid Hardship - TCO Only – For Cases Automatically Restricted After 29/06/07 (Info)

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You may receive an adjust in year payments referral form or an adjust in year payments WAM referral from

• An Enquiry Centre

Or

• A Contact Centre

You may also receive a letter from a claimant informing you that a reduction in their tax credits payment is causing them hardship.

This reduction could have been caused by

• An in year adjustment to the claimant’s tax credits payments to

• Prevent an overpayment occurring

Or

• Reduce the amount of overpayment that will occur at the end of year

• Cross year recovery from the claimant’s tax credits payments to recover an overpayment that was generated in a previous award period
   
• A combination of both an in year adjustment and a cross year recovery

For more information about in year adjustments and cross year recovery follow the guidance in How Payments Are Profiled

An adjustment to increase the amount of tax credits paid will not normally be made if

• The claimant’s award is only made up of the Family or Baby elements of Child Tax Credit ( CTC)

Or

• Tax credits payments have been reduced following investigation that has established deliberate error or fraud

A manual adjustment will only be applied in the above instances if there is evidence of exceptional personal circumstance provided to support the hardship claim

Where there is recovery on the award, you will need to explain the rates of recovery to the claimant and that these rates are designed not to cause hardship. The rates of recovery are

• 10% if the maximum entitlement is in payment
   
• 25% if entitlement has been tapered
   
• 100% if family or family and baby element only is in payment

These rates are the same for in year adjustments and cross year recovery.

Any reduction in these rates can only be made in exceptional circumstances and will be referred to Debt Management and Banking (DMB) for consideration

Note: Where a claimant has been in receipt of additional payments to reduce cross year recovery in a previous tax year as part of the secondary hardship process. These payments will not automatically carry over into the next tax year. In these circumstances, if a claimant re-submits their hardship claim in the new tax year, forward this claim straight to DMB for consideration without first explaining the cross year recovery rates

Manually adjusting payments to avoid hardship does not return the claimant’s tax credits payments to the previous level. This is to ensure that some recovery of the overpayment is made during the current year. To determine how much is to be recovered, the claimant’s award is put into one of the following categories

Category A

The claimant is entitled to the maximum award for WTC and / or CTC

A payment adjustment, if made, will take the level of tax credits payment up to 90% of what would have been received if the claimant had not been overpaid earlier.

Category B

The claimant is entitled to CTC above the family element and / or WTC below the maximum limit

A payment adjustment, if made, will take the level of tax credits payment up to 75% of what would have been received if the claimant had not been overpaid earlier.

The payment adjustment will be set at a level which collects some of the tax credits amount that is believed will be overpaid at the end of the year.

When the payment adjustment has been applied, the claimant will have an overpayment of tax credits at the end of the tax year. These overpayments will be recovered from the claimant(s) in one of the following ways

• By reducing payments made to them in awards of tax credits made for future tax years
   
• By recovering the overpayment from them direct

You must complete a TCO - Adjust in year payments proformawhile working through these instructions.